Since July, crude oil futures prices have been on a downward trend, but after a sharp decline in early August, prices stabilized and began to rebound, continuing this upward trend into this week. Analysts believe that the shift in market risk appetite and geopolitical factors are the primary drivers behind the recent rebound in crude oil futures prices, and the future trend will depend heavily on geopolitical developments.

Huang Liunan, a senior energy researcher at Guotai Junan Futures, noted that market sentiment has improved in the past week as fears of a U.S. recession temporarily subsided, leading to a rebound in major asset prices. From historical experience, it takes time for the market to fully assess whether the U.S. economy is truly in recession or whether yen carry trades have reversed. Even if a recession does occur or market arbitrage patterns reverse, the extent of their impact on various asset prices remains to be seen.

Nanhua Futures energy and chemical analyst Liu Shunchang pointed out that this week’s rebound in international oil prices was driven by two main factors. First, there was a shift in market risk appetite. Last Monday, global financial markets experienced panic, with the VIX index spiking to 65, a level close to the peak of the 2020 pandemic. As panic gradually subsided, oil prices began to rebound. Second, geopolitical factors played a role, with escalating tensions between Iran and Israel raising concerns about potential disruptions to Middle Eastern oil supplies. Additionally, the conflict between Russia and Ukraine shows signs of further escalation.

Duo Bingqin, an energy and chemical analyst at Everbright Futures, noted that the recent crude oil market has been significantly influenced by macroeconomic and geopolitical factors. "In the past two weeks, overseas recession expectations have put pressure on oil prices. Last week, as yen carry trades reversed, global stock markets declined, and crude oil positions, as a beneficiary asset of low-interest yen, were significantly reduced, leading to a sharp drop in oil prices." However, she added that overall, the global crude oil market remains relatively healthy. In July, OPEC's oil production decreased by 60,000 barrels per day compared to the previous month, and U.S. commercial crude oil inventories have declined significantly for six consecutive weeks. Although the tight supply-demand balance provides some support for the market, the recent rebound has been primarily driven by macroeconomic factors and geopolitical tensions. Once macroeconomic risks ease, the repositioning of overseas macro funds, along with rising tensions in the Middle East, have also contributed to the upward momentum in oil prices. However, since the actual production of oil has not been affected, the upward push on prices remains limited.

Regarding the sustainability of this rebound, Liu Shunchang believes that as panic continues to subside, the main driver of rising international oil prices will be geopolitical tensions. Therefore, the duration and extent of this oil price rebound will largely depend on developments in the Middle East. Currently, geopolitical risk premiums in the options market have reached levels seen in April this year and October last year. "If the Middle East geopolitical situation escalates further this week, oil prices could continue to rise, with Brent crude potentially targeting $85 per barrel." He added that if geopolitical risk premiums quickly decline, oil prices could also fall rapidly. Combined with weaker-than-expected U.S. economic growth and declining refinery profits, oil prices could see a more significant drop, with Brent crude potentially testing the $75 per barrel support level again.

Huang Liunan also noted that with the stabilization of crude oil futures prices over the past week, market buying sentiment has clearly warmed, stimulating restocking demand. Domestic major and non-state-owned refineries have been pricing at various levels. Due to factors such as exchange rates, medium-sour crude oil differentials, and sales by major players in the Dubai window, the price of Shanghai crude oil futures has been weaker than international prices.

On the supply and demand front, the latest monthly report from the EIA estimates supply-demand gaps of -770,000 barrels per day in August, -1.4 million barrels per day in September, and 480,000 barrels per day in October. The supply-demand gaps for the third and fourth quarters of this year are estimated at -880,000 barrels per day and -660,000 barrels per day, respectively, with first and second-quarter gaps of -1.04 million barrels per day and -50,000 barrels per day next year. According to Duo Bingqin, from a quarterly perspective, the third quarter is the peak for oil prices this year, but as the overseas demand season comes to an end, the upward drive for oil prices is not obvious. In the fourth quarter, as demand enters the off-season, if OPEC+ increases production as planned, the supply-demand gap will narrow further, and combined with the uncertainty of overseas recession expectations, the center of gravity for oil prices may shift downward. In the short term, after macroeconomic risks subside, oil prices are expected to maintain a high-level fluctuation. Future attention should focus on changes in OPEC+ production policies and whether the U.S. Federal Reserve will start cutting interest rates in September as expected, as well as developments in Middle Eastern geopolitical situations.

Huang Liunan added that geopolitical factors still have a marginal impact on the oil market. Although Iran has not yet issued a clear military response, and Lebanon's actions have only involved attacking Israeli military facilities, there is no doubt that geopolitical issues remain an uncertainty that the market cannot ignore. Overall, in the short term, market sentiment continues to recover, supported by OPEC+ production cuts, and oil prices may still see monthly gains in September. As for the price differential between domestic and international markets, the "SC-Brent" spread is approaching historic lows, suggesting that Shanghai crude oil futures may be undervalued and could potentially catch up in the near future.